Investors get early gains from US chip legislation

Legislation to ease the shortage of computer chips in the United States has advanced in the Senate, and investors－among them the husband of the nation's top lawmaker－are watching the bill's progress closely.

On Wednesday, House of Representatives Speaker Nancy Pelosi, whose husband Paul has profited from exercising call options on the stock of chipmaking high-flyer Nvidia, signaled her support for the bill, known as the CHIPS Act, or Creating Helpful Incentives for the Production of Semiconductors for America.

Nvidia and two other major chipmakers, Advanced Micro Devices and Qualcomm, were some of the biggest gainers on US stock markets on Wednesday.

The House plans to vote as early as next week on the legislation to provide tens of billions of dollars in subsidies and tax credits for the semiconductor industry, Pelosi said.

On Tuesday, the Senate, in a 64-34 approval of a procedural measure, set the stage for potential votes to pass the legislation in the chamber as soon as this week.

The bill is also widely seen as a tool to help US semiconductor makers compete with an ascendant China in this industry and ease supply chain problems by decreasing US companies' reliance on foreign-made semiconductors.

Multiple measures

Though the final text of the legislation has not yet been released, Senate aides said the measure includes more than $50 billion in subsidies for US semiconductor companies, as well as a four-year, 25 percent tax credit to encourage companies to build US semiconductor plants. The tax credit is estimated to be worth about $24 billion.

Opposing the legislation, Senator Rick Scott, a Florida Republican, said taxpayers should get a return on their investment rather than giving grants that do not have to be repaid.

Sourabh Gupta, a senior fellow at the Institute for China-America Studies in Washington, told China Daily that "the scale of the subsidies will have an overcapacity-driven, trade-distorting effect in global markets".

Gupta added: "And some of the subsidies might come to be seen in retrospect as plain and simple 'corporate welfare' at taxpayers' expense, i.e., investments the firms would have made in any case even had the subsidies not been dispensed."

The legislation also contains "guardrails" supported by the White House that would restrict the ability of subsidized companies to invest in China, Newsweek reported.

Earlier this month, Paul Pelosi exercised call options in Nvidia, according to the Congress Trading website. A call option is the right to buy a stock at a predetermined price. The call option buyer profits when the stock price rises above the option strike price.

Paul Pelosi exercised 200 call options, or 20,000 shares, of the California-based chipmaker that were worth between $1 million and $5 million, according to a disclosure that Speaker Pelosi, a California Democrat, filed on July 14 with the House.

"The speaker does not own any stocks," Pelosi spokesman Drew Hammill told Fox Business.

In a Wall Street Journal Potomac Watch podcast on Tuesday, Allysia Finley, a Journal editorial board member, said of the legislation: "So this is just the hugest handout for the semiconductor industry that has really been very successful in lobbying Congress and using its customers, the tech giants, as well to convince the Congress members that we need to do this so we don't fall behind China."

Yifan Xu in Washington and agencies contributed to this story.